Housing prices are at record highs, but Biden and Trump largely skipped over the issue at the debate

By Aarthi Swaminathan

Americans are facing the most expensive housing market in decades, but neither presidential candidate addressed the affordability crisis in detail on Thursday

Americans are facing the most expensive housing market in decades, and home prices are at an all-time high. Housing affordability is the No. 1 issue for younger Americans in this presidential election - in a recent survey, they said it was even more important than student-loan debt or abortion rights.

Yet the topic only merited a few sentences from President Joe Biden during the first presidential debate against his opponent, former president Donald Trump, on Thursday night. Trump did not address the topic of housing costs.

What Biden said about his plans to address high housing costs

Moderator Jake Tapper started the debate with a question about the economy, noting that "typical home prices have jumped more than 30 percent" since Biden took office in 2021. Biden responded that he had worked to fix an economy that was "in free fall" when he took office, and that there was "more to be done" because "working-class people are still in trouble."

Biden continued: "That's why I'm working so hard to make sure I deal with those problems, and we're going to make sure that we have reduced the price of housing. We're going to make sure we build 2 million new units. We're going to make sure we cap rents, so corporate greed can't take over. The combination of what I was left with and corporate greed are the reason why we're in this problem right now."

Biden's comments about "corporate greed" were a reference to his view that institutional landlords are driving up rents. He has said previously that he wants to address "egregious" rent increases and take on corporate landlords and private-equity firms to crack down on "illegal information sharing, price fixing and inflating rents."

During Thursday's debate, Biden also brought up a proposal he mentioned in his State of the Union address in March: a $10,000 tax credit for first-time home buyers. That proposal has drawn criticism, particularly from people on the right, who say the policy would worsen the current imbalance between housing demand and a major shortfall in the supply of homes for sale.

"The biggest problem remains a lack of affordable supply, driven largely by local regulations on land use and building," Mark Calabria, who served as director of the Federal Housing Finance Agency under the Trump administration, told MarketWatch.

"I have not been a fan of the Biden's administration's housing policies, as they've been predominantly demand focused, even when labeled otherwise," he said. "Of course increasing demand in the face of limited supply largely results in price increases. Proposals like tax credits or down-payment assistance will largely drive up prices, worsening affordability."

After a later question about disparities between Black and white Americans Thursday night, Biden defended his record on improving economic outcomes for Black Americans. He referred at one point to housing, saying: "They're trying to provide housing for Black Americans and dealing with segregation that exists among these corporate, these corporate operations that collude to keep people out of their houses."

Going into Thursday's debate, there was little expectation that the candidates would delve into detail on housing policy, Ralph McLaughlin, a senior economist at Realtor.com, said in a statement before the matchup.

"Past debates between Biden and Trump have shown housing will not likely be a focal point. In the two 2020 presidential debates, housing discussion was limited to Biden's plan to green and weatherize the U.S. stock," he said. "There was zero discussion of home prices, affordability, or rents in the context of housing in those two debates."

Realtor.com is operated by News Corp subsidiary Move Inc. MarketWatch publisher Dow Jones is also a subsidiary of News Corp.

The housing issues voters are dealing with

Meanwhile, home buyers are contending with an unaffordable housing market, and 40% of renters believe they'll never be able to afford a home.

Prices of resale homes hit a record high in May. The median sale price was $419,300, up 5.8% from a year ago. May was also the 11th month of year-over-year price gains. There was no respite in newly built homes, which had a median sales price of $417,400 in May.

The median monthly mortgage payment on a $400,000 home is nearly $2,800 at current mortgage rates, about $50 below the all-time high set in April, according to data from real-estate brokerage Redfin.

Rental costs are also high, Michael Neal, a senior fellow at the Urban Institute, told MarketWatch. A recent study from researchers at Harvard University found that housing costs have hit an all-time high since they began tracking the data 30 years ago. Only 5.8% of renters nationwide - roughly 2.6 million rental households - have sufficient income to afford to buy a median-priced home, according to Harvard.

"Everyone needs a place to live. And that is increasingly being challenged by the conditions out there," Neal said.

There's no simple solution to the housing-affordability crisis. The market is "stuck" and is "unlikely to become unstuck soon," economists at Bank of America wrote in a note on Friday.

The housing market faces several headwinds: With builders pulling back on new construction of homes, and with elevated mortgage rates and rising home prices, the bank said that it doesn't expect housing to become "unstuck" until 2026 or beyond.

One problem is that the U.S. doesn't have enough homes on the market, although estimates vary as to the size of the shortfall. Real-estate brokerage Zillow estimates that the market is short about 4.5 million houses, while the National Association of Home Builders puts that figure at 1.5 million units.

The lack of supply is caused in part by the so-called lock-in effect. That refers to homeowners who bought homes or refinanced their mortgages to take advantage of ultralow rates during the pandemic, and who have little interest in moving and taking on a much higher rate.

The current average rate on a fixed-rate 30-year mortgage is close to 7%, while the 30-year rate went as low as 2% during the pandemic. Bank of America economists don't see the lock-in effect resolving any time soon. "We think the lock-in effect could persist for another 6 to 8 years given low turnover and the historically wide gap between the effective mortgage rate and actual mortgage rates," BofA economists wrote.

-Aarthi Swaminathan

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06-28-24 1446ET

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